Will Wainewright

25/05/2011 Author: Will Wainewright

Emerging markets still a big draw for hedge funds

According to HFR figures, emerging markets have generated returns of 2.81% so far this year, an impressive feat given global volatility. Performance within Latin America was better still, posting 3.40% YTD.

It is, therefore, no surprise more managers are looking to employ hedge fund and absolute return strategies in emerging markets. Thames River is preparing to do just that, premising the launch of its Thames River Global Emerging Markets Absolute Return Fund on the assumption that the convergence of valuations between developed and developing countries demands a more flexible approach.

Countries such as Brazil and India are driving global growth, with expanding working populations and budget surpluses jealously eyed by cash-strapped Western governments. But many expect the outperformance of the last few years to cool off, hampered by inflation, and Thames River is convinced its new short book will be well-placed to capitalise.

For investors looking beyond the emerging market efforts of global brands, the Alternative Investment Managers Association (Aima) is doing its best to open up Brazil’s rapidly developing domestic hedge fund industry.

Following a path already laid by a number of prime brokers, Aima is making LatAm inroads and has appointed Michelle Noyes as its first representative in Brazil, the aim being to develop understanding among domestic hedge funds of regulation in other key regions.

Easier said than done – but any moves to make regional managers more accessible will be welcomed by investors, who have frequently flirted with local funds, only to be put off by a different approach to operational standards.

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